Michelin Looks to Increasing Sales, Expects Demand Increase
Michelin has released its first quarter financial report with the figure of 3.9 billion euros in net sales (representing an increase of 12.2 per cent) riding high on its statement. The manufacturer has seen a decent return to favourable comparatives a year after the depth of the financial crisis dominated most balance sheets, though European original equipment truck sales were a notable exception, down 1.2 per cent (including figures for Russia and Turkey. In comparison, year-on-year change in the segment in all other regions was up, most spectacularly in South America (up 56.9 per cent) and Asia (up 24.2 per cent). The European passenger car and light truck OE segment was much stronger, with 30.2 per cent rises in net sales.
In terms of the outlook for the rest of 2010, Michelin states that it expects growth of “around 10 per cent…as mature economies gradually recover”. With the assumption of stable raw materials prices, the manufacturer also says it will continue “deployment of a responsive pricing policy”. Finally, the company refers to “capital expenditure of 1-1.2 billion euros”, with projects in the developing markets of Brazil, China and India.
According to the report, Michelin’s market share has “held firm” in the quarter, with its volume rising 15.3 per cent. The company says it experienced “faster growth in original equipment than replacement sales”, a factor which alongside “contractual price adjustments indexed to raw materials costs” led to a “negative 2.1 per cent price-mix effect”.
An original equipment surge of 49 per cent in the global passenger and light truck segment was partially the result of European and Chinese scrappage incentives, the company suggests. In addition, the largest rebound of 72.2 per cent growth in North America was explained in part by the very low comparatives in 2009’s Q1. In Africa and the Middle East, OE replacement sales of Michelin tyres fell 0.7 per cent – very much an anomaly compared to other markets, but also comparatively small in change.
On the replacement side in the same segment, there was an upward trend globally, though reaching a more modest total of 10.7 per cent. South America saw the largest jump of 15.7 per cent, buoyed particularly by sharp rises in demand in Argentina (27.8 per cent) and Brazil (21 per cent). China – “reportedly the only market that did not slow in 2009” – saw its rise in demand for Michelin tyres continue, up 20.5 per cent for the quarter. Meanwhile, harsh winter weather, early purchases to avoid price increases and anticipation for growth alongside financial recovery amongst dealers all led to 12 per cent growth in European demand.
In the truck segment, both OE and replacement grew globally at around 19 per cent. The Brazilian government’s support of capital expenditure subsidies, alongside brisk recovery, helped the South America region to particularly strong growth in both segments (56.9 per cent in OE; 26 per cent in replacement), re-attaining 2008 levels of demand. China demanded an extra 17.6 per cent OE and 14 per cent replacement as “the world’s largest truck tyre market”, while demand in North America showed signs of recovery, with a 13.7 per cent rise in OE and an 18.3 per cent rise in replacements, partially attributable to “tighter conditions in the retread market”. “Truckmaker hesitation” stunted Europe, says Michelin, causing demand to drop 1.2 per cent in OE, but a 36.9 per cent growth in replacement reflected optimism by the dealers, as minor signs of recovery, such as a “slight upturn in freight tonnage”, influenced restocking decisions.
In more specialist fields, Michelin tyres experienced markets still finding their feet. India and China showed upturns in earthmover tyres with demand for energy and raw materials increasing in both markets, while motorcycle tyres saw upward trends in Europe, perhaps partially on the back of the launch of the Power Pure tyre. However, agricultural markets remained slow in recovery, with the replacement market reportedly “dampened by buyer hesitation”. Michelin’s speciality tyre business declined by 7.8 per cent with net sales of 517 million euros.
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